KOHLS Corp

2. Debt

Long-term debt, which excludes borrowings on the revolving credit facility, consists of the following secured and unsecured debt:

Our estimated fair value of secured and unsecured senior long-term debt is determined using Level 1 inputs, using financial instruments with unadjusted, quoted prices listed on active market exchanges. The estimated fair value of our secured and unsecured senior debt was $1.2 billion at January 31, 2026 and $1.2 billion at February 1, 2025.

In the fourth quarter of 2024, S&P downgraded our senior unsecured credit rating from BB to BB- and Moody’s downgraded our rating from Ba3 to B1. As a result of the downgrades, the interest rate on our 3.375% notes due May 2031 increased an additional 50 basis points in the second quarter of 2025 due to the coupon adjustment provision within the notes. During the second quarter of 2025, Moody's downgraded our senior unsecured credit rating from B1 to B3; however, further downgrades by Moody's do not trigger incremental interest rate increases. In total, the interest rate on the notes due May 2031 have increased 175 basis points since their issuance due to the coupon adjustment provision within the notes.

In the second quarter of 2025, we issued $360 million aggregate principal amount of 10.000% senior secured notes due 2030 and received proceeds of $357 million, net of the debt discount. The notes are guaranteed by certain of our subsidiaries. Certain of these guarantees are secured by eleven distribution centers and E-commerce Fulfillment Centers, which are held by our subsidiaries, as well as the equity interests in one of our subsidiaries.

Also in the second quarter of 2025, $353 million in aggregate principal amount of our 4.25% notes matured and were repaid.

In the fourth quarter of 2025, we reduced our outstanding debt by $87 million through repurchases of our notes on the open market, resulting in a gain on extinguishment of debt of $11 million recognized in net interest expense.

In the second quarter of 2024, we completed a voluntary redemption of the remaining $113 million of outstanding 9.50% notes due May 15, 2025. We recognized a $5 million loss on extinguishment of debt in net interest expense which is primarily a make whole premium paid to holders as a result of the redemption.

Borrowings under the $1.5 billion revolving credit facility, recorded as short-term debt, were $0 as of January 31, 2026, and $290 million as of February 1, 2025. Outstanding borrowings under the credit facility bear interest at a variable rate based on SOFR plus the applicable margin. As of January 31, 2026, we had $44 million of standby and trade letters of credit outstanding under the credit facility, which reduces the available borrowing capacity.

Our various debt agreements contain covenants including limitations on additional indebtedness and certain financial tests. As of January 31, 2026, we were in compliance with all covenants of the various debt agreements.

We also had outstanding standby and trade letters of credit outside of the credit facility totaling approximately $5 million at January 31, 2026.